1. You are given the following MRP and supply of labor schedules for a monopsonist.

Number of Workers         MRP           Wage rate

1                                   $8.00            $5.00
2                                    7.50              5.50
3                                    7.00              6.00
4                                    6.50              6.50
5                                    6.00              7.00
6                                    5.50              7.50

a) Construct the MFC (marginal factor cost) schedule of the monopsonist.

b) What level of employment satisfies monopsonist's rule for profit maximization?

c)  Given your answer to b, what wage will the monopsonist pay in order to maximize profit?

d) Suppose that the monopsonist is now confronted with a minimum wage of $6.50, construct  the MFC schedule associated with this new labor supply schedule.

e) Given the minimum wage of $6.50, what level of employment satisfies monopsonist's rule for profit maximization?

f) Given your answer in e, what wage must the monpsonist pay in order to maximize profit?

g) Does this minimum wage cause the monopsonist to increase or decrease the level of employment?

2. Why does the nominal interest rate differ from the real interest rate?  Under what condition are the the two interest rates the same?